‘It’s a completely new world’: How investors, economists and market strategists are reacting to Trump’s win

U.S. stocks are surging to record highs and longer-term bond yields are jumping to multi-month peaks after Donald Trump was re-elected president in an unambiguous shift to the Republican Party in American politics. Republicans have taken control of the Senate, and while there still is some uncertainty, a Republican majority appears within grasp for the House as well.

Here’s how market strategists and portfolio managers from Canada and across the world are reacting. This posting will be updated with fresh reaction throughout the day:

BMO ECONOMISTS LED BY DOUGLAS PORTER:

“The U.S. election results will shift the economic landscape, particularly if the Republicans also manage to hold onto the House. However, there are still plenty of questions around the extent to which the campaign rhetoric translates into policy reality. The lean will certainly be to more tax relief, although the positive growth impact will be countered somewhat by broad trade tariffs and uncertainty, accompanied by a firmer U.S. dollar and higher bond yields. The latter are driven by bigger budget deficits, modestly higher inflation risks, and possibly less Fed easing than previously expected. On balance, this puts some upside risk for our 2% growth call for 2025, but tax relief will take time and so the major impact on growth may be more of a 2026 story. For the Fed, rates are still on track to fall 25 bps this week, and likely by 25 bps again in December, but we look for a slower pace of rate reductions in 2025, with the terminal rate now likely 3.25%-to-3.50% (50 bps higher than previous). …

In the event of a Republican sweep, Canada’s economy might benefit initially from stronger U.S. growth, as its largest trading partner buys three-quarters of its merchandise exports. Energy producers would also rejoice if the Keystone XL pipeline was resurrected. However, the country could be one of the hardest hit (along with China and Mexico) from a possible trade tussle. Increased uncertainty about tariffs and the fate of the USMCA ahead of the 2026 review could depress capital flows to Canada and weaken domestic investment, likely extending the nation’s productivity slump. Suffice it to say, none of this is good for the Canadian dollar, which is already challenged by faster rising unit labour costs relative to the U.S. While tariffs and a softer loonie might add some upward pressure to prices, potential economic weakness could hold inflation below the 2% target, keeping the Bank of Canada in easing mode. The Bank expects the economy to strengthen on the back of further planned rate cuts, and any threat to its outlook could spur a more aggressive response. This explains the initial relative outperformance of Canada’s bond market to the election results, with yields rising less than south of the border and Canada-U.S. spreads hitting extremes. The BoC slashed policy rates 50 bps in October, but a more cautious path of 25 bp moves over the coming months is more sensible given the post-election uncertainty and heightened risk to the Canadian dollar. The federal government might need to adjust corporate tax rates to prevent investment from migrating south. Canada will also be pushed harder to raise its NATO contribution much faster than currently planned, potentially leading to a higher budget deficit. Moreover, Trump’s pledge to deport undocumented immigrants could impede the Canadian government’s goal of slowing population growth if migrant flows increase across the U.S.-Canada border. These issues will play a prominent role in the coming Canadian election.”

DAVID ROSENBERG, ECONOMIST AND FOUNDER OF ROSENBERG RESEARCH:

“A major point to be made is that we will not have to endure weeks or months of a contentious and contested election and all the uncertainty that would have implied. A sigh of relief from that alone. That said, this is more than a relief trade — this is a power trade on steroids. The markets have gone ahead to price in a full four-year term, with hopes of deregulation and corporate tax cuts fueling even more optimism in the stock market —Dow futures +1,200 points! And the KBW index up almost +10%!!

Tesla has surged +12% and Trump Media & Technology has skyrocketed more than +40%!! Visions of an $8 trillion borrowing spree and the overall pro-growth policy thrust are causing a coronary in the bond market (10-year T-note yield +16 basis points to a four-month high of 4.42% — but what is interesting is that market rates in Europe have come down -4 to -5 basis points!) alongside the reduced prospect now of a more aggressive Fed easing cycle (though one can imagine the pressure that Donald Trump will be placing on Jay Powell, as he successfully did in 2019). A looming global tariff war is taking the U.S. dollar (+1.7%) up to a one-year high; completing the risk-on wave is Bitcoin soaring to all-time highs (+8% to $75,372). Along with bonds, safe-haven gold has succumbed to a -0.8% loss to $2,722 per ounce (all market quotes are time-stamped to 4:30 a.m. EST). ….

One would have thought with market betting odds already at 60% prior to the election, that a Trump win was largely priced in. So far, not the case. …

It needs to be emphasized that the election cycle is no match for the business cycle — Richard Nixon in 1972, Ronald Reagan in 1980, Bill Clinton in 1992, George W. Bush in 2000, and Barack Obama in 2008 can all attest to that. And Donald Trump is walking into one of the most acute equity market bubbles of all time and he too will at some point be dealing with the fallout from the pricking of said bubble. And that bubble just got a lot bigger overnight.”

THOMAS MATHEWS, HEAD OF MARKETS, ASIA PACIFIC, CAPITAL ECONOMICS:

“There are a few points to note about the initial market reaction and how things could evolve.

For a start, there’s a faint whiff of the “bond vigilantes” in the sharper rise in yields at the long end of the Treasury curve (which could, in principle, reflect higher term premia). Republican control of the House would increase the chances of a bigger stimulus package, and fiscal risks are plainly higher than they were during Trump’s previous term, given the rise in yields and worsening fiscal outlook in the interim. Ahead of his first win, the 10-year Treasury yield was ~1.8%, the US federal deficit around 3% of GDP, and the outstanding debt ~75% of GDP. Today, those numbers are ~4.4% on Treasury yield, and ~7% & nearly 100% of GDP, respectively.

Our base case remains, though, that the dollar’s reserve status will prevent fiscal worries from growing too great. (And if the bond vigilantes did rear their heads, Republican appetite for tax cuts would probably diminish.) Instead, we suspect that the more important story for the bond market is just the inflationary effect of Trump’s policies, including the tax cuts but also the tariffs and immigration reductions, all of which would be likely to result in a higher path for the federal funds rate.

Meanwhile the U.S. dollar has clearly been boosted by the higher US yields, and its fortunes could therefore depend on the size and scope of any stimulus. It will also be worth keeping a close watch on foreign central banks, and particularly how far they allow their exchange rates to fall to offset the effects of tariffs on their domestic economies. Today’s sharp fall in the Chinese renminbi (by its own low-volatility standards), is perhaps an early piece of evidence on that front.

Finally, Republican control of the House would probably be positive, on balance, for the stock market given the higher chances of corporate tax cuts. But it’s worth a note of caution: the stock market rallied strongly after the 2016 election too, as Trump’s conciliatory victory speech convinced investors that he was more focused on tax cuts than on tariffs and renegotiating trade deals. When the trade war began in 2018, the market did hit a (admittedly short-lived) road block.”

MATHEUS ZANI, FX RISK MANAGER AT FOREX FIRM DEAGLO:

“Market sentiment indicates that a Trump presidency, along with a Republican majority, is expected to stimulate the U.S. economy, the stock market, and retain a strong U.S. dollar over the medium term. The greenback’s strength likely reflects expectations that Trump’s tariff policies could drive a renewed increase in U.S. inflation. Now a thumbtack in Trump’s foot; how to weaken the USD to promote a prevalent US manufacturing industry.

The reduced likelihood of rate cuts has been reflected in the Overnight Night Index Swap curve (OIS) which recorded a 10bp+ repricing across 2025 tenors. This implies a policy rate approaching 4.0% by June 2025, nearly 100 basis points higher than market pricing in mid-September.

Trump has already made several statements, including promises to lower taxes and reduce debt, relying on the age old trickle down effect. This may prove challenging as Trump’s policies are estimated to boost the budget deficit by US$7.5 trillion according to the Wall Street Journal.

Trump has also made peacetime announcements, assuring he has no desire to start any more wars but rather end them. This is likely to continue to depreciate safe-haven assets like the Swiss franc (CHF), Japanese yen (JPY), and gold prices (XAU) in the future (each down ~2% since the election results).”

CHRISTSOPHER HARVEY, WELLS FARGO STRATEGIST:

“We raise our 2024 SPX target to 5830 from 5535, assuming 21.6x (was 20.5x) 2025E EPS of $270 (no change). The multiple expansion assumes our Econ Team’s year-end 10yr UST forecast of 3.8% and the current investment-grade (IG) credit spread of 83bps … This year many outperforming portfolios have been aligned with Growth and Price Momentum factors. A broadening out of the market and a move down cap will be a challenge to many active managers — as it was back in July. Buy the Election. In the late summer/early fall we advised investors not to “sell the first rate cut,” but rather “buy the election” as 12mo returns following the last six presidential elections and the last six easing cycles have seen median and average returns for the major indices in the double digits. Also, in our view we have under-appreciated economic growth, a solid earnings season (SPX Q3 to date: EPS 6.6% and sales 1.5% above consensus), tight credit spreads, and positive momentum … . We have an overweight on the Banks, and would buy on strength as the regulatory change with a new administration is expected to support group multiples and earnings.”

HENDRIK DU TOIT, CEO, NINETY ONE:

“It’s a completely new world, and we need to understand that.

He (Trump) has a massive endorsement and will move much faster than before. The market will price that in very quickly. What’s really important here is the markets like clarity, and they have that.”

ANDREA SCAURI, SENIOR PORTFOLIO MANAGER, LEMANIK, LUGANO:

“With Trump’s victory, you’ll get much stronger fiscal policies compared to what might have been under a Democratic administration. This will have repercussions for inflation, and you can see that already with this morning’s rise in Treasury yields.

So, who benefits from all of this? I think old-economy sectors, like oil, drilling, mechanical, and heavy industry, will benefit. And probably also tech, as the American consumers will have more money in their pockets, they might spend it on new phones, TVs, or invest in the stock market.”

EMMANUEL CAU, HEAD OF EUROPEAN EQUITY STRATEGY, BARCLAYS, LONDON:

“You have renewables, auto sector, some of the tariff stocks and China-exposed names which are lagging, so even though the market is going up, you are seeing some discrimination based on some of the Trump policies.

Roughly speaking, you have renewable and tariff trade names underperforming, then you have your U.S. consumer and dollar plays doing better. That seems to be the story now.”

DAVID ALLEN, PORTFOLIO MANAGER, PLATO GLOBAL ALPHA FUND, SYDNEY:

“Markets absolutely crave certainty, if we’d had a long contested result you would have seen price swings to the downside in major markets…Trump’s victory was also somewhat priced in at the margins.

I do think Trump 2.0 will be different from Trump 1.0… I don’t think Trump was even expecting to win the first time and was less prepared. This time is different, I expect him to push through a lot of fast major legislation within the first 100 days, so hold onto your hats.”

ROGIER QUAEDVLIEG, SENIOR U.S. ECONOMIST, ABN AMRO RESEARCH, AMSTERDAM

“Given the inflationary expectations associated with Trump’s economic and fiscal policies, we expect U.S. rates to continue rise across the yield curve. We anticipate that the market will further retrace expectations for Fed rate cuts next year due to increased inflation projections, while also pricing in higher term premiums. However, our economic analysis suggests that the full implementation of Trump’s policies – especially the tariffs – will eventually weigh heavily on the US economy.

“Trump’s universal tariffs plan is also expected to have a substantial impact on the already fragile euro zone economy, while the inflationary effects for Europe will be more limited. This could trigger an even more accelerated rate cutting cycle path from the ECB and will likely lead to a greater divergence between the US and European policy rates.”

ANDRZEJ SZCZEPANIAK, EUROPEAN ECONOMIST, NOMURA, LONDON:

“In summary: It’s bad news for Europe.

“Trump winning means tariffs which will adversely affect growth in Europe. The European Commission is expected to retaliate like-for-like, which could mean higher inflation in the euro area – or, as manufacturing firms’ pricing power is so diminished, as we have been flagging for some time, firms could be forced to absorb these higher costs, which in turn may result in some firms shuttering and unemployment rising, thus weighing more heavily on growth.”

KEN PENG, HEAD OF ASIA INVESTMENT STRATEGY, CITI WEALTH, HONG KONG

“A lot of this is based on investors’ view that Trump would cut taxes or at least keep tax rates low. Now that it’s likely to be looking like a red sweep – additional cuts are possible.

Deregulation is another major positive for the economy and markets, particularly for the financial, energy and tech sectors. The negatives are tariffs. That’s going to be negative for global growth, you know, particularly in China, Asia (and)Europe… you see inflation expectations rise.

I think the market is currently still just enjoying the positive aspects of a red sweep, but I think as time passes, you are likely to see the risks … get priced in.”

NAKA MATSUZAWA, CHIEF MACRO STRATEGIST, NOMURA, TOKYO:

“I think the market was not yet ready for a ‘red sweep’… if the ‘red sweep’ materialises, 10-year yields for U.S. Treasuries could go up to as high as 4.50% and above. Dollar/yen could go over 155. They’re kind of half pricing in that level right now.

If Trump can pass tax and spending bills first, then he doesn’t have to rush for the hardline policies against China, which come rather later. If Congress is controlled by Republicans Trump can prioritise economic stimulus measures.”

RONG REN GOH, PORTFOLIO MANAGER, EASTSPRING INVESTMENTS, SINGAPORE:

“With Trump, market volatility is likely to pick up, so trading-wise, it does open up opportunities. The volatility comes from uncertainty surrounding how he intends to follow through on some of his campaign promises.

Right now the markets are focusing narrowly on the prospect of tariffs, because it is the easiest lever to pull directly under a presidential executive order, but we’ve seen between 2016 and 2020 other levers that can be pulled to contain China.

From this perspective, I think a foreign investor is likely to position more defensively towards China-focused risk.”

WONG KOK HOONG, HEAD OF EQUITY SALES TRADING, MAYBANK, SINGAPORE:

“Carnage in HK/China hasn’t really materialised because traders and investors are still awaiting any possible (stimulus) announcements. As for the next four years in general, for a start we may need to download Truth Social app.”

With files from Reuters. Some quotes have been edited and condensed for brevity and clarity.